Ideals of service, equity and civic duty that once counted even in private firms are all but gone. M

The single most important element of the new-right project of the 1980s and 1990s was a relentless Kulturkampf against the public domain and its culture of citizenship, equity and service. To a large extent, new Labour has continued that attack.

To understand what that means for British politics and society, we have to understand the public domain. It should not be confused with the public sector. It depends on public institutions (notably the rule of law), but it is not confined to them. In principle, a large public domain could coexist with a small public sector, as it did in the 19th century. Government expenditure as a proportion of GNP was lower in 1900 than it had been in 1831. As late as the 1920s, Keynes expected further growth in the public domain (not that he used the term) - not as a result of state action but because privately owned companies would increasingly assume public responsibilities. The Bank of England was already an example. By the 1950s, big private firms - organised hierarchically and run by salaried professionals - did not behave very differently from their public sector counterparts. They increasingly adopted a public service ethic. The ruthlessness of traditional capitalism had largely disappeared; Adam Smith's invisible hand had been replaced, as Anthony Crosland put it, by "the glad hand".

Indeed, the public domain should not be seen as a "sector" at all. It is best understood as a dimension of social life, with its own norms and decision rules, cutting across sectoral boundaries: as a set of activities that can be carried out by private individuals, charities and even private firms as well as public agencies. In the public domain, citizenship rights trump both market power and the bonds of clan or kinship. Professional pride in a job well done or a sense of civic duty replaces the hope of gain as well as loyalty to family, friends or dependants. Goods are distributed on the basis of need and not of personal ties or access to economic resources. As the Dahrendorf Commission put it: "People act neither out of the kindness of their hearts, nor in response to incentives . . . but because they have a sense of serving the community." That ideal will not always be followed in practice. But nor are the ideals of the market and private domains. Sellers sometimes collude to do down buyers, and friends are sometimes false.

In the private domain, loyalty to friends and family is a supreme virtue. In the public domain, it is not. E M Forster's assertion that he would rather betray his country than his friends was shocking because he had applied the norms of the private domain to one where they do not belong. Favouritism and nepotism are shocking for the same reason. In the market domain, goods and services are - quite properly - commodities to be bought and sold. But votes, honours, government policies and justice belong to the public domain. They must not be commodified. By the same token, the measuring rods that assess efficiency in the market domain - "throughput", productivity, added value, monetary return on capital - have no place in the public domain. Academics do not become more efficient when the staff-student ratio falls and lectures are overcrowded; the value of a stay in hospital is not enhanced if low-paid contract nurses, with little commitment to the job, replace established nursing teams.

The public domain is both priceless and precarious - a gift of history, always at risk. It can take shape only in a society in which the notion of a public interest, distinct from private interests, has taken root. Unlike the private domain of love, friendship and personal connection and the market domain of buying and selling, the values and practices of the public domain do not come naturally. They have to be learnt and then nurtured.

In the past 20 years, an aggressively interventionist state has enfeebled the institutions and practices that nurtured the public domain. As a result, it is now in crisis. Deregulation, privatisa-tion, public-private partnerships, proxy markets, performance indicators mimicking those of the private corporate sector and a systematic assault on professional autonomy narrowed the public domain and blurred the distinction between it and the market domain. Public functions of all kinds were farmed out to unaccountable, appointed bodies dominated by business interests and managed according to market principles. Intermediate institutions such as the BBC, the universities, the schools, the museums and the health service were forced, as far as possible, into a market mould. So, above all, was the senior civil service, where the frontiers of the public domain had been most zealously guarded, and in which its values had been most thoroughly internalised.

The dilapidated public services of 21st-century Britain are the most obvious legacy of this Kulturkampf but not the most dangerous one. Incessant marketisation has done even more damage than low taxation and resource starvation. It has generated a culture of distrust that is corroding the values of professionalism, citizenship, equity and service like acid in the water supply. For the marketisers, the professional public-service ethic is a con. Professionals are self-interested rent-seekers, trying to force the price of their labour above its market value. The service ethic is a rhetorical device to legitimise a web of monopolistic cartels whose real purpose is to rip off the consumer. There is no point in appealing to the values of common citizenship. There are no citizens; there are only customers.

The service ethic still has devoted champions, but danger signals are everywhere. The growing interpenetration of politics and business; the dumbing down of the BBC and parts of the broadsheet press; the private sector sponsorship that has invaded Oxbridge colleges, opera companies and even the police; the diversion of academic energies from the pursuit of knowledge and the education of the young to a scrabble for advantage in mindless assessment exercises - all tell the same story. The dykes our Victorian ancestors built to protect the public domain from invasion by the market domain have been breached at point after point. The notion of a common public interest transcending private interests has all but disappeared.

The consequences go wider than appears at first sight. The threat to democracy once came from overtly anti-democratic movements on the far right and far left. The threat now is more insidious. It comes from what has been called "market-driven politics", from the steady retreat of the civic ideal in the face of the marketisers' Kulturkampf. One manifestation is a decline in public confidence in the whole political process. Another is a marked fall in electoral participation. The most serious is an incomplete but nevertheless unmistakable return to the politics of connection, favouritism and patronage which 19th-century radicals labelled "Old Corruption", and which the early champions of the public domain thought they had banished for ever.

None of this implies a return to the public domain of old days. Upright and conscientious though they were, the elites who ran its institutions were often aloof and condescending. The operational codes and tacit understandings of the central state were saturated with pre-democratic, essentially monarchical assumptions and values that became increasingly out of joint with the attitudes of a better-educated and less deferential citizenry. As the state sank in esteem, the public domain all too often sank with it. These failings gave the marketisers their opportunity. The public domain cannot be reinvented unless the causes of its recent tribulations are understood, and their lessons learnt.

Where does the frontier between the public and market domains lie? Certain occupations - police, civil servants, judges, soldiers - normally belong to the public domain. Others - foreign-exchange dealers, supermarket managers, software designers, pop musicians - inhabit the market domain. But many cross the frontier between the two. Barristers are market traders, selling their wares in a highly competitive market place. But that is not all they are. They also have duties to the court - to ensure that justice is fairly and impartially administered, for example. Before the National Insurance Act 1911, most doctors earned their living from privately paid fees. But many adjusted their fee schedules to their patients' ability to pay, and did so because they subscribed to a public service ethic. Before universities were funded by the state, academic salaries were paid from fee income. Although access to a university education was largely confined to those who could pay for it, academics also tried to promote the public goods of disinterested learning, a qualified elite and the transmission of high culture to the young. These values decreed a meritocratic examination system, and ruled out the sale of degrees.

In other words, doctors, lawyers and educators are not just rationally calculating market actors behaving in accordance with the profit motive. They are not agents of their clients alone. They are also the agents of the public at large. They may fail to discharge their public service obligations, but, if they do, they dishonour their vocation.

This fuzziness of boundaries applies even to the state itself. For much of the past 120 years, most activities of the British state have been part of the public domain. The officials who have carried them out have also belonged to it. This has not always been true. Henry VIII, Elizabeth I, Philip II and other monarchs of early modern Europe ruled powerful and imposing states, but they did not acknowledge a public interest transcending private interests. The state was then an emanation of the sovereign ("L'Etat c'est moi," as Louis XIV declared), not a separate entity standing above both ruler and ruled. The totalitarian party states of the 20th century were emanations of the party and the leader. They perverted the service ethic of the public domain into an instrument of party control, colonised its institutions and remodelled its practices to fit party imperatives.

Most societies throughout most of history have lacked a public domain because there was no public to have a domain. There have been monarchs and subjects, lords and serfs, masters and servants, owners and slaves, priests and lay people, classes and masses. And there have always been buyers and sellers. These did not - could not - make a public. There were no citizens, and therefore no space where citizens could engage with each other. The notion of a public interest could have no meaning. The public domain is a gift of history, and of fairly recent history at that.

It is literally a priceless gift. The goods of the public domain cannot be valued by market criteria. They include fair trials, welcoming public spaces, free public libraries, subsidised opera, mutual building societies, the broadcasts of the BBC World Service, the lobbying of Amnesty International, clean water, impartial public administration, disinterested scholarship, blood donors, magistrates, the minimum wage, the Pennine Way and the rulings of the Health and Safety Executive. Less obviously, they also include liberty - not in the familiar sense of freedom to pursue private interests, but in the classical republican sense of freedom from domination. In the public domain, market power is overridden, and private clientelism forbidden; citizens bow the knee to nobody. And in principle, at least, republican liberty goes with democratic self-government and state accountability. In the public domain, citizens collectively define what the public interest is to be through argument, debate and negotiation. If the rulers of the state and the officials who serve them are not accountable to the citizenry and their representatives, the language of the public interest can become a cloak for private interests. The public interest is not a fixed essence to be derived from first principles through some allegedly value-free calculus of individual costs and benefits, or a kind of Mosaic tablet brought down from Sinai by the great and the good. It is inherently contestable, both in the sense that agreement on it can never be final, and in the sense that it is defined through conflict and the resolution of conflict.

By the same token, the public domain is the source of public trust. Without trust, there is no market, only pirates or gangsters preying on the weak and unwary. In a trustless society, exorbitant transaction costs would make market exchanges unfeasible.

But the market domain consumes trust; it does not produce it. Although trust can be produced in the private domain, in small, face-to-face societies, such relationships are, by definition, narrow and introverted, distrustful of strangers. Once market relationships extend beyond such confines, public trust is indispensable to them. The rule of law, enforceable contracts, enforceable property rights and an efficient fraud squad - these quintessential products of the public domain are the bedrock of the market economy. They make it possible for market actors to learn to trust each other. And what is true of trust in the market place is true more generally. Citizens trust each other when they know that public institutions are governed by an ethic of equity and service. If the public domain is invaded by the market or private domain, if justice is on sale, or public offices go to kinsfolk or cronies, trust and citizenship are both undermined.

The barriers that protect the public domain from invasion are easily breached. Nepotism and favouritism can never be banished altogether. It is almost a law of sociology that elites try to reproduce themselves; the elites of the public domain are no exception. Behind the arras encircling the public space of democratic politics lurk the loyalties of family and clan. Market power is even harder to banish. Lloyd George, the pioneer of the social citizenship state, sold honours; accusations of sleaze haunted the Major government and now haunt Tony Blair. Much more insidious than the outright purchase of favours is the impact of private economic interests on public policy-making. The Ministry of Defence excessively tenders to the arms industry, the agriculture department to the livestock industry, the Treasury to the financial services industry. There is an inescapable tension between the egalitarian promise of democratic citizenship and the inegalitarian realities of the market domain. The capitalist renaissance of our day has made it more acute than it has been for many years.

The public domain faces more subtle threats as well. It depends, as much as anything, on a set of ethics embodied in distinctive practices. The intrusion of market measuring rods and a market rhetoric may twist these practices out of shape, and corrode the ethics they embody. The motivations of the practitioners may then change. Instead of seeing themselves as servants of the public interest, they may become market or quasi-market agents, maximising their interests in a market mode, and sacrificing the public interest in the process. The introduction of performance-related pay and corporate sector assessment procedures into the universities or the civil service may lead academics to distort their research priorities or to dilute the intellectual quality of their courses, and civil servants to become less willing to tell the truth to power. The introduction of contingency fees may lead barristers to give a lower priority to their duties to the court and to their role as upholders of the principle of equality before the law. And when the vehicle for marketisation is a centralised and intrusive state in which public accountability is inadequate, all these threats may be exacerbated.

By the late 1990s, it looked as if the neoliberal crusaders had overreached themselves, with the result that Blair came to office. Blair is not Margaret Thatcher in drag. Like her, he wants to use the power of the state to enable Britain to "adapt" to the imperatives of the global market place, but he does not want to use it in the same way. He and his colleagues do not believe that once the barriers to free competition have been demolished, market forces will do the rest. They want deliberately to improve the stock of human capital, to equip the disadvantaged to compete and, in an eerie echo of the 19th century, to re-engineer the welfare state so as to favour the deserving and penalise the undeserving. They believe in doing this through extensive public intervention and modest redistribution.

For the most part, however, they have followed the previous regime's approach to the public domain. New Labour has pushed marketisation and privatisation forward at least as zealously as the Conservatives did. The new regime is no more friendly to professionals than the old one was. Ministerial rhetoric is saturated with the language of consumerism.

Thus the Conservative Kulturkampf succeeded in its central aim. Neoliberal political economy has become part of the mental furniture of the political elite. Blair and his ministers have internalised its axioms: privatisation, deregulation, free trade, low taxation, budgetary orthodoxy. These define the limits within which their domestic policies are framed.

New Labour's approach to leadership and governance also mimics its predecessors'. Like Thatcher, but more skilfully, Blair has sought to speak directly to an undifferentiated "people", over the heads of the intermediate institutions in which the values and practices of the public domain were once embedded. In some respects, he goes further. Despite her contempt for unions, local authorities, universities and the old-style civil service, she had a profound respect for the Conservative Party, and, indeed, embodied its culture and instincts more thoroughly than any other postwar leader. By contrast, Blair's disdain for his party - indeed, for party as such - is almost palpable. New Labour is a personal vehicle for his own history-less, free-floating secular ecumenism and moral unction, which he can steer in any direction he likes. From it, he can address the suburbs as well as the inner cities, rich as well as poor, old as well as young, Christians as well as unbelievers, hunters as well as animal rights activists, supporters of family values as well as of gay rights.

As the Iraq war showed, this does not mean that he always listens to the people, still less that he feels bound to do what they want. But populist leaders often disdain the opinions of the people they claim to represent. Like most populists, Blair has constructed an imaginary people in his own image. He assumes that if real people disagree with him, they must have failed to understand him. In any case, the imaginary people and the real people usually march together. Whereas populists like William Jennings Bryan and David Lloyd George had to rely on intuition, Blair and his associates have made use of modern techniques of opinion research to track every shift in the public mood and help them to shape it to suit their purposes. Political leaders have always tried to present their policies attractively. Under Blair, policy-making and presentation form a seamless web.

The notions that the public interest can and should be distinguished from private interests, and that human flourishing depends on satisfying public needs as well as private wants, have virtually disappeared from political argument. When political leaders debate the future of the public services, they do so from the quintessentially private perspective of the individual consumer. The question they raise is how to balance competing private claims - private claims to goods financed through taxation, against private claims to those bought in the market place. Few dare to make a public interest argument: to suggest that public expenditure on universities or libraries or old-age pensions or even hospitals enriches the entire society, those who don't use the services in question as well as those who do.

The equally crucial notion of democratic citizenship has fared no better. Populist centralism has no place for the civic ideal of open debate and public engagement. In a populist polity, citizenship is hollowed out. The people are passive, not active. They are consumers of public policy, not participants in shaping it. Their wishes are conveyed to policy-makers through the leader's intuitions or the pollster's focus groups.

Partly as cause, and partly as consequence, public trust in some of the main institutions of the public domain is dribbling away. Yet this has happened in a way that makes nonsense of the assumptions behind the marketisation of the past 20 years. The marketisers claim that actors in the public domain cannot be trusted to deliver, that the panoply of audits, targets and league tables is essential to keep them on their toes. Yet the public seems to have lost trust in the marketisers more than in the marketised. In a 2002 MORI poll, 91 per cent trusted doctors to tell the truth, 85 per cent trusted teachers, 78 per cent trusted professors. By contrast, only 25 per cent trusted business leaders and only 20 per cent trusted ministers. Civil servants (45 per cent) fared little better. In 1986, the British Social Attitudes survey asked its sample how far they trusted British governments "to place the needs of the nation above the interests of their own political party". Thirty-eight per cent trusted the government to do this "just about always" or "most of the time". By 1996, that figure had fallen to 22 per cent.

Two implications stand out. The first is that populist centralism is profoundly unpopular. The picture that emerges from opinion surveys is not one of cynicism, still less of apathy. It is one of streetwise disaffection. The British tradition of extraparliamentary protest is alive and well, and not just in the opposition to the Iraq war. In a poll in 2000, substantial majorities thought the Seattle and Prague anti-globalisation demonstrations, the anti-capitalist street demonstrations in London, the British petrol blockades and the Countryside Alliance and pro-hunting demonstrations were all either "definitely" or "perhaps" justified. Constitutional reforms - fixed-term parliaments, a written constitution and freedom of information - were supported by large majorities.

A crushing majority of the British people distrusts the political class, and has lost faith in the system through which it is governed; but that is because the political class increasingly behaves as if it distrusts the people. Public disenchantment is a response to the hollowing out of citizenship, not a cause.

The second implication is bleaker. In principle, at least, the public domain is a space where public questions are publicly debated and resolved, where citizens come together to decide what should count as the public interest and how it should be embodied in public policy. If the political system loses legitimacy, if citizens lose confidence in the institutions that are supposed to represent them and to hold the ring for free and open debate, that space is likely to contract; and once it starts to contract, it is likely to go on doing so. After all, what is the point of debate if no one listens?

The threats to the public domain feed on themselves. The more the public distrusts politicians, the more the media will cater to its distrust, the more the public will feel its lack of trust is justified, the more politicians will distrust the public, and the more the space for democratic politics will contract. Marketisation is self-reinforcing, too. Money talks; the louder it talks, the harder it becomes to hear un-moneyed voices.

Though they did not use the term, the Victorians invented the public domain. Now it has to be reinvented. Its boundaries will have to be re-established, and they will have to be equipped with new barriers against incursions from the private and market domains. As in 19th-century Britain, it will need creativity, imagination and flexibility to do this, and it will almost certainly take a long time.

Extracted from Decline of the Public by David Marquand, published 20 January by Polity (£14.99 pbk)